The European Journal of Comparative Economics

ISSN: 1824-2979

EJCE Year: 2005, December. Volume: 2 - Issue: 2

Reforms and Economic Growth in Transition Economies: Complementarity, Sequencing and Speed

by Karsten Staehr

Start page: 177 - End page: 202

Keywords: Economic reforms; growth; principal components; gradualism versus big-bang

Jel code: P21; C33; H11; P30

Abstract:

This paper considers the effects of sequencing and reform speed on output performance in transition countries. These largely unsettled issues are addressed using principal component techniques to construct reform clusters and by explicit tests of speed effects. The results indicate that broad-based reforms are good for output growth, but so is a policy of liberalisation and small-scale privatisation without structural reforms. Conversely, large-scale privatisation without adjoining reforms, market opening without supporting reforms and bank liberalisation without enterprise restructuring affect growth negatively. Swift reform policies allow transition countries to benefit from higher growth for longer time. The speed of reforms appears otherwise to have little effect on growth in the short and medium term.

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